Exam 7: Production Costs

One season is a short run as long as:

A firm can produce 450 litres of milk per day with four workers and 500 litres per day with five workers. The marginal product of the fifth worker expressed in gallons per worker per day, is:

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20 000 a year, and take over a store building that he owns and currently rents to his brother for $6000 a year. His expenses at the sushi bar would be $50 000 for food and $2000 for gas and electricity. What are his explicit costs?

The law of diminishing returns explains why:

A zero economic profit is the same as a zero accounting profit.

Implicit costs are best thought of as:

The law of diminishing returns applies to which of the following segments of the marginal product of labour curve?

The marginal cost is the change in:

Economies of scale exist over all ranges of output for which short-run average total cost exceeds long-run average cost.

Explicit costs would include:

Marginal cost is:

In the long run, all costs are considered variable.

Total variable cost:

Costs that do not vary as output varies and that must be paid even if output is zero are called total fixed costs.

Narrbegin Exhibit 6.2 Production of pizza data Warkers Pizzas 0 0 1 4 2 10 3 15 4 18 5 19 -Exhibit 6.2 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals:

Narrbegin Exhibit 6.8 Cost schedule for producing pizzas $\begin{array} { | c | c | c | c | } \hline \text { Pizzas } & \begin{array} { c } \text { Fized } \\\text { cost (\$) }\end{array} & \begin{array} { c } \text { Variable } \\\text { cost (\$) }\end{array} & \begin{array} { c } \text { Tatal } \\\text { cost (\$) }\end{array} \\\hline 0 & & & \\\hline 1 & & & 48 \\\hline 2 & & 17 & \\\hline 3 & & 27 & \\\hline 4 & & & 78 \\\hline 5 & 40 & & \\\hline 6 & & 64 & \\\hline 7 & & 00 & \\\hline\end{array}$ -By filling in the blanks in Exhibit 6.8, the AFC of four pizzas is shown to be equal to:

During the course of a week, McDonalds has enough time to hire or lay-off workers, but it does not have enough time to expand its kitchen or add an additional seating area. In this situation, McDonald's:

The marginal curve determines the L-shape of the AVC curve.

The long-run average cost curve traces the lowest points of the AVC and ATC for all firms.

The law of diminishing marginal returns explains: